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Sales Compensation Plan Explainer Template

Four documents and six sheets that price every deal shape by selling hour, find the cliffs, and run last year's real book through the new plan.

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What you get

Pack of 10 files: 4 documents, 6 spreadsheets

Sales Compensation Plan Explainer Template
  • A Plan Is What It Pays ForDocument
  • Plan ParametersSpreadsheet
  • Deal Shape EconomicsSpreadsheet
  • Attainment and CliffsSpreadsheet
  • Quota Feasibility by MixSpreadsheet
  • Earnings Scenarios by Deal MixSpreadsheet
  • Plan Change ComparisonSpreadsheet
  • Plan ExplainerDocument
  • Worked ExamplesDocument
  • Plan FAQDocument
RiverSales Compensation Plan Explainer Template

Deal Shape Economics · Ardsley Analytics, FY plan

The plan ranks these two shapes backwards from the company.

ShapePays the rep/hrReturns the company/hrPlan rankCompany rank
Mid-market new logo$93$5723rd6th
Enterprise, ramped 3-year$26$9416th3rd

Mispriced by 5.9x, the same ratio as the two shapes' cost of sale. The plan pays 3.6 times more for a shape that returns 0.61 times as much.

Why: quota retires on year-one value only

A 3-year ramp worth $654,000 contracted retires just its first $118,000 against quota. A rep reading the rate alone never finds this. Reading the hours does.

Every sales compensation communication guide agrees on the delivery mechanism: a plan letter, an FAQ, a calculator modeling earnings at 80, 100 and 120 percent of quota, and a rollout meeting. That is genuinely good practice for explaining a number. It does not tell you what the number is actually paying for, and a rep does not decide how hard to work. A rep decides which of six or seven kinds of deal to spend the next eighty hours on, and an attainment curve says nothing about that choice.

So this pack prices the plan instead of reading it, grouping a year of closed deals into the shapes the business actually sells. Each shape carries two figures: pay per selling hour to the rep, and gross-profit return per selling hour to the company. Ranking both columns finds every place they disagree. A mid-market new logo pays $93 an hour and returns $572; a ramped enterprise deal pays $26 and returns $941, rewarding the shape worth less. The same arithmetic prices the threshold cliffs that make one December deal worth ten times its own value.

Then the plan gets tested against last year's real book, rep by rep, unchanged, because reps will run that comparison themselves within a day of the kickoff. A quota that moved further than the rate lowers the real rate even when on-target earnings rose, and it is better to hand reps that finding than to have them discover it. A deal review pack session works it through an existing book; a rep still climbing toward that same quota gets checked against their own ramp benchmark instead.

What the plan pays for, and what happens to last year's book

Deal Shape Economics with both rankings, Quota Feasibility against the hour budget, and Plan Change Comparison run rep by rep.

Sales Compensation Plan Explainer Template
RiverDeal Shape Economics

Deal Shape Economics

Ardsley Analytics, eight account executives, one uniform quota. Gross margin 82%.

ShapeYr-1 ACVHrsWinPays/hrReturns/hrCost of saleVerdict
Seat true-up, existing$24,000988%$235$1,92412.2%Agrees
Inbound expansion$38,0001672%$171$1,40212.2%Agrees
Mid-market new logo$92,0005844%$93$57216.2%Disagrees
Competitive displacement$146,00015238%$44$8984.9%Agrees
Enterprise, flat 3-year$235,00020526%$34$7334.6%Agrees
Enterprise, ramped 3-year$118,00018833%$26$9412.8%Disagrees

The inversion pair. Plan rank 3 against company rank 6, and plan rank 6 against company rank 3. A 5.9x mispricing, which is exactly the ratio of the two cost-of-sale figures, because it is the same arithmetic read from the other side.

Strip the $3,000 new-logo bonus and mid-market pays $70 an hour rather than $93. The bonus is a quarter of what makes that shape attractive, not the rate.

RiverQuota Feasibility

Quota Feasibility by Mix

1,300 selling hours a year. Hours to a full quota, one shape alone, then blended.

ShapeHrs/winHrs/$1,000 retiredHours for a full quotaVerdict
Seat true-up, existing10h0.43h511hFits alone
Inbound expansion22h0.58h702hFits alone
Mid-market new logo132h1.43h1,719hImpossible alone
Enterprise, ramped 3-year570h4.83h5,794hImpossible alone

Blended with seat true-ups as fill: 1 ramped enterprise win costs 570 pursuit hours plus 461 fill hours, 1,031h total, fits. 2 wins cost 1,139 plus 411, 1,550h, over budget.

The quota rations the company's best per-hour shape to exactly one pursuit a rep a year, and it does that through the quota rather than the rate, which is why reading the rate alone never finds it.

RiverPlan Change Comparison

Plan Change Comparison

Last year's real books, unchanged, run through both plans.

RepYr-1 ACVLast yearThis yearChangeWhy
Rivas$986,000$134,795$110,600-17.9%Quota up 33%, rate down, bonus down
Okonkwo$1,276,000$165,470$135,160-18.3%Cleared last year's quota
Brandt$752,000$114,600$93,200-18.7%Six logos at $3,000 not $5,000
Iyer$676,000$91,050$9,000-90.1%Unchanged book lands under the new gate

Four reps, same books: $505,915 becomes $347,960, down 31.2%, while on-target earnings rose $15,000 a head. Both are true. Iyer's book never changed and now lands under a $720,000 gate that did not exist last year.

Brandt against Iyer: $76,000 more ACV is worth $84,200, a marginal rate of 111% against the plan's stated 10%.

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What's in the pack

01

A Plan Is What It Pays For

The method itself: group a year of closed deals into shapes, price each one per selling hour on both sides, and find every position where the two rankings disagree.

02

Plan Parameters sheet

The plan document turned into numbers, including the base rate it never states outright and what the accelerator's multiplier against its lower rate actually nets to.

03

Deal Shape Economics sheet

Every shape's pay-per-hour and return-per-hour ranked side by side, with the cost of sale that explains why a single flat rate still prices shapes five times apart.

04

Attainment and Cliffs sheet

The threshold and accelerator priced at the attainment reps are actually sitting at in December, not at 100 percent of quota where every cliff looks harmless.

05

Quota Feasibility by Mix sheet

Hours to a full quota in each shape alone against the selling-hour budget, then blended, so the number of times the best shape can be pursued in a year is a fact rather than a guess.

06

Earnings Scenarios by Deal Mix

Four real books, not four hypothetical ones, each run through the new plan and shown per selling hour so a rep sees what a specific mix of deals actually earned.

07

Plan Change Comparison sheet

Last year's actual bookings run through both plans rep by rep, so the rollout number is the one reps will compute themselves rather than the one the summary slide shows.

08

Plan Explainer, Worked Examples and FAQ

The three documents that go to the team: what changed and why, four real books explained in the shapes reps recognise, and the hard questions answered with a number.

How to use it

  1. 1

    Open in River, or take it blank

    Open the pack in River and hand it the plan and a year of closed deals, or download the Word documents and CSV sheets and fill them in yourself.

  2. 2

    Read the plan into parameters

    Base rate, threshold, accelerator and bonus get pulled out as numbers, including the ones the plan states only indirectly, like a rate nobody wrote down.

  3. 3

    Price every shape per selling hour

    Group last year's closed deals into six or so real shapes, then rank what the plan pays against what the company gets back for the same hour.

  4. 4

    Run last year's book through the new plan

    Real books, not modeled ones, rep by rep. Where the same book pays less despite higher on-target earnings, the explainer says so before the kickoff does.

Frequently asked questions

Is this template free?

Yes. Four Word documents and six CSV sheets, downloaded as a zip, no signup. River is the optional half: it reads the plan and a year of closed deals, prices every shape per selling hour, and runs last year's book through the new plan. Single-shot jobs live in River's tool index and the rest in the template library.

We don't have hours-per-deal tracked. Can this still work?

Yes. Where hours are not tracked, the pack derives them from cycle length, from qualified to signed, and says plainly that the figure is derived rather than measured. The ordering the ranking depends on is usually robust to a rough hours estimate; only the absolute per-hour figures move.

Why price deal shapes instead of just explaining the attainment curve?

Because the curve answers how much a rep earns and never answers for what. A rep does not decide how hard to work, they decide which of six or seven kinds of deal to spend the next eighty hours on, and no attainment curve says anything about that choice. Pricing each shape per selling hour is what actually answers it.

Our new plan pays reps more overall. Why would the rollout still be hard?

Because on-target earnings and what a real book pays are different numbers. A quota that rises 33 percent while target variable rises 19 percent lowers the base rate even though the headline figure went up. Reps run their own book through the new plan within a day of the kickoff, so the pack runs it first.

How does it find the cliffs in a threshold or accelerator?

By pricing the gate at the attainment reps are actually sitting at late in the year, not at 100 percent of quota where every cliff looks harmless. A deal that crosses a gate from below often carries a marginal commission rate many times its own value, and that number is what the FAQ and worked examples lead with.

Does this replace the comp plan document or the legal sign-off?

No. The plan document itself stays wherever your legal and HR process keeps it. In the United States, California Labor Code Section 2751 requires a written commission agreement setting out how commissions are computed and paid, with a signed copy given to the employee and a signed receipt kept. That obligation is separate from this pack and unaffected by it.

Why does a three-year ramp pay less than a one-year deal of the same first-year size?

Because quota usually retires on year-one value only. A ramp billing more over its full term still retires the same as a one-year deal billing its whole value up front. Under FASB's contract-cost rules, a commission is capitalized and amortized over the expected customer relationship, so accounting treats the multi-year deal as the larger asset while the quota treats it as the smaller event.

Sources

  1. California Legislative InformationCalifornia Code, LAB 2751 (opens in a new tab)
  2. DART – Deloitte Accounting Research Tool13.2 Costs of Obtaining a Contract (opens in a new tab)

Written by

Chandler Supple

Co-founder & CEO, River

Chandler has spent the last six years working in AI, building tools for millions of users and Fortune 100 companies. In 2025, he co-founded River to build a new kind of operating system for AI agents.

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Reviewed by

Brian Joseff, Co-founder, River

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Find out what your plan actually pays for

Take the Word documents and CSV sheets blank, or open this exact pack in River and hand it the plan and a year of closed deals.

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